Minimum Investment Levels

Minimum investment levels for hedge funds are usually high, implicitly dictated by legal limits on the number of investors who are not high net worth individuals (“qualified purchasers” or “accredited investors”), and restrictions on promotion and advertising. The Securities Exchange Commission (USA) and Financial Services Authority (UK) requirement of private placement for hedge funds means that hedge funds tend to be exclusive clubs with a comparatively small number of affluent investors.

An amount of $250,000 is a common minimum initial investment, and $100,000 is common for subsequent investments. From the perspective of the fund manager, having a small number of clients with relatively large investments keeps client servicing costs low. This allows the hedge fund manager to concentrate more on trading and less on client servicing and fund promotion.

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